Is China Blowing Another Huge Bubble?

China’s central bank, the People’s Bank of China, just okayed 3 trillion yuan ($482.6 billion) in new lending for 2013. It’s not much more than what it allowed in 2012—but still a considerable sum for a country struggling with overcapacity.

That’s merely worrisome though. What is actually stomach-churning, though, is the 679% year-on-year increase in “trust loans” disbursed in December, hitting 264 billion yuan. And, yes, that’s 679%, not a typo. (We recently explained in detail why these super-shady investment vehicles—which allow banks to finance off-the-books loans to companies and local governments by offering them to their retail customers as investments—should unnerve everyone, but the key words here are “Ponzi” and “scheme.”) The central bank also noted today that it expects a 16% year-on-year increase in “total social financing,” a hefty portion of which is trust loans.

Meanwhile, Kate Mackenzie worries that this is proof that China has failed to "rebalance" its economy away from state investment and toward a consumption based economy. Matthew Yglesias is less concerned:

To MacKenzie (or her headline writer) that means China "still has the same old problems." I would say the other way to look at that is that China still doesn't have the same old problem of having settled into a slow-growth, low-resources-utilization equilibrium that we see in much of the developed world.

One thing we learned from the U.S. financial crisis is that there's no gentle unwinding of bad debt when it's this pervasive. China, fortunately, is not as intertwined into the global financial machinery as U.S. and European banks are, but we'd be fooling ourselves to think that a financial crisis leading to a recession or sharply curtailed growth in China wouldn't have ripple effects on the global economy.

China's industry ministry Tuesday set an aggressive goal of forging global giants in the electronics sector within the next two years through mergers and alliances and reiterated a long-standing push for Chinese companies to explore overseas acquisitions.